CALPIRG Blog

Yesterday's L.A. Times reported on encouraging developments in a lawsuit that could bring to an end one of the health insurance industry's most abusive practices. 

Health insurers don't like it when you get sick -- they make more profit if they don't actually need to pay for any health benefits -- and they can be very ingenious about padding their bottom lines.  One of the schemes they've hit upon is to trump up reasons to drop the coverage of people who become sick, often by going back and finding "misstatements" on the policyholder's initial application for coverage that they use to justify cancelling coverage (apparently it wasn't important enough to them to catch these "misstatements" when they were trolling for customers).  Even worse, these cancellations are often retroactive, meaning that the consumer, who's been paying their premiums in good faith, suddenly can find themselves on the hook for treatment they received when they had insurance.

The good news is that a lawsuit making its way through the California courts could change all of that.  There's a good argument that the insurers' retroactive cancellations violate state law, and policyholders who have been dumped are suing to hold the insurance companies accountable.  On Tuesday, the court ruled that the suit could go forward as a class action, bringing together the claims of everybody who's been hurt by this practice.  The decision gives reason to think that the court is sympathetic to the plaintiffs on the merits, too.

A ruling in their favor can't come soon enough.  The deal consumers make with insurance companies is simple -- they pay their premiums, and if something bad happens, they get covered.  Insurers shouldn't be allowed to wriggle out of their obligations and pocket the premiums with no strings attached.